Has Israel made a huge mistake letting a Chinese firm run part of Haifa port?
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Ex-US envoy: This must be addressed sooner rather than later

Has Israel made a huge mistake letting a Chinese firm run part of Haifa port?

‘Why did we do it? I don’t know, but we needed someone to operate our ports quickly,’ says official, amid fears Beijing’s potential intelligence gathering could keep US navy away

Raphael Ahren is the diplomatic correspondent at The Times of Israel.

A view of Haifa bay, April 24, 2018. (Yossi Zamir/Flash90)
A view of Haifa bay, April 24, 2018. (Yossi Zamir/Flash90)

Did Israel compromise its own security and its alliance with the US by allowing a Chinese company to operate parts of the Haifa port?

Several analysts and anonymous officials have in recent weeks expressed great concern over a deal that will put the Shanghai International Port Group in charge of the port’s container terminal starting in 2021.

Allowing Beijing a foothold in so strategically important a location, close to an Israeli naval base, they fear, could compromise Israeli intelligence assets and even lead US military vessels to avoid docking at Haifa at all.

A senior Transportation Ministry official this week dismissed such concerns as the plot of a spy movie and called them politically motivated, noting that the Chinese are already operating ports across the Western world and asserting that Israeli authorities did due diligence before signing the deal.

And yet, even diplomatic sources within the Israeli government admit that letting a company tied to the communist regime operate the terminal raises legitimate concerns in Washington. They further acknowledge that they don’t really know how this misguided decision came to pass in the first place, and they are urging Jerusalem to quickly sort out the matter before it causes serious harm to the US-Israel relationship.

“We warned that this would be an issue,” a senior government source told The Times of Israel this week, speaking on condition of anonymity. “This issue is part of a broader concern that the Americans have about our relationship with China. Their concerns are legitimate.”

China is currently making great efforts to gain control over ports in dozens of countries around the world, which the US sees as a distinct threat, the official continued.

Illustrative: Chinese foreign workers excavating tunnels in the Carmel in northern Israel take a break to have lunch. February 24, 2009. (Moshe Shai/Flash90)

“So why did we do it? I don’t have the answer to that. I am sure that this decision wasn’t made haphazardly and that there were serious discussions about it. It probably has to do with financial considerations. The Chinese can do it faster and better, and we needed someone to operate our ports quickly.”

Ex-US envoy: Deal with it, and soon

Dan Shapiro, who in 2013, during his tenure as US ambassador to Israel, actively — but ultimately unsuccessfully — encouraged American companies to bid for the Haifa port tender, said that Israel, when it signed, was probably not fully aware of the dangers of such a deal.

“To have a Chinese company operate a port of a close ally potentially poses a significant challenge and maybe a risk for US Navy operations,” he said.

“It needs to be studied what exactly the risks are and how they can be mitigated. This underscores how rapidly the question of the challenge that China is posing to the US globally has become a central foreign policy challenge for the US.”

Israel would be well advised to establish a mechanism similar to the Committee on Foreign Investment in the United States, Shapiro said. Known as CFIUS, this inter-agency body includes senior officials from various branches of government who discuss if and how foreign investments could harm national security.

Former US ambassador to Israel Dan Shapiro attends at a fare-well session at the Knesset, January 17, 2017. (Miriam Alster/Flash90)

“I don’t think Israel has a procedure like that,” said Shapiro, who currently serves as a visiting fellow at Tel Aviv’s Institute for National Security Studies.

Giving the tender to China — other countries interested were Germany, Swiss and the Philippines — might not have been a mistake per se but could have been the result of “lack of awareness,” he added, pointing to the rapidly changing nature of US-China relations.

“But now that there is awareness, it needs to be dealt with, and it needs to be dealt with and sooner rather than later,” Shapiro said.

Fixing the problem will “require intensive consultation” between various US and Israeli military and intelligence agencies, he noted.

“In normal times, the defense minister would travel to Washington to work through this issue with his American counterpart,” he later commented on his Twitter account. Currently, Prime Minister Benjamin Netanyahu holds the defense and foreign affairs portfolios.

Lack of consultation

According to a source familiar with the matter, the Transportation Ministry committed a grave error when it chose the Chinese without consulting the National Security Council.

File: A Sa’ar 4.5-class missile boat leaves the Haifa port ahead of the Israeli Navy’s flotilla in honor of Israel’s 70th Independence Day on April 19, 2018. (Judah Ari Gross/Times of Israel)

Concerns over the Shanghai International Port Group, or SIPG, operating the Haifa port first surfaced in late August, during a University of Haifa conference about the future of maritime security. Participants worried that the deal could “limit or preclude” cooperation with the US Navy, according to Newsweek.

At the conference, retired US admiral Gary Roughead, the former chief of naval operations, said that SIPG port operators could “monitor closely US ship movements, be aware of maintenance activity and could have access to equipment moving to and from repair sites and interact freely with our crews over protracted periods,” the magazine reported in September.

“Significantly, the information systems and new infrastructure integral to the ports and the likelihood of information and electronic surveillance systems jeopardize U.S. information and cybersecurity,” Roughead continued. “These factors might not preclude brief port visits, but it would preclude homeporting and other protracted projects and initiatives.”

An aerial view of the Israel Shipyards facility in the Port of Haifa, June 2013. (CC-BY-SA-3.0 Meronim/Wikipedia)

Chuck Freilich, a former Israeli deputy national security adviser, confirmed that many in the US Navy are worried about this case.

“We’ve seen these concerns from a number of naval sources, and it’s not something we can ignore,” he said. “There is a problem here that has to be addressed.”

Not only does a Chinese company operating Haifa port pose security risks for Israel, it also has the potential to lead to major diplomatic and economic crises with either Washington or Beijing, he posited.

It goes far beyond the port issue. That’s a big problem in and of itself, but it pales in comparison to what the wider ramifications of this could be

In the late 1990s, Israel started selling the Falcon early warning aircraft and drone technology to China, a billion-dollar deal ferociously opposed by the US administration, he recalled.

“This caused one of the deepest crises in US-Israel relations ever. And it caused the collapse of the Israeli-Chinese military relationship,” he said.

At the time, Beijing saw in Israel a potential partner for major arms deals. But the administration, fearing a future clash with the Chinese military, exerted great pressure on Jerusalem to kill the deal, which dashed Israeli hopes for lucrative defense deals with the Asian giant.

After it annulled the deal, Israel had to pay China $300 million in damages, and the Defense Ministry established a mechanism that would give the Prime Minister’s Office and the Foreign Ministry a say in future arms exports, Freilich remembered.

“China was furious, and the military relationship with Israel was destroyed, and it has never recovered from it. But they later agreed to intensify their commercial relationship with Israel,” he said.

An aerial view of the Haifa Port, northern Israel, June 14, 2014. (Shay Levi/Flash90)

Canceling the agreement with SIPG now would likely negatively impact today’s robust commercial relationship, he argued.

“It goes far beyond the port issue. That is a big problem in and of itself, but it pales in comparison to what the wider ramifications of this could be.”

So what should Israel do?

“The first thing to do is begin quiet behind-the-scenes talks with relevant navy and administration officials to find out what the concerns are and see if they can be allayed without backtracking from the agreement,” Freilich suggested.

The Jerusalem Post last week cited three anonymous sources saying the American concerns had prompted Jerusalem to conduct “a review of the agreement at a high level.”

Foreign Ministry spokesperson Emmanuel Nahshon told The Times of Israel on Wednesday that he was unaware of any such review. He declined to provide any additional comment for this story.

The Prime Minister’s Office declined to comment.

The US Embassy in Tel Aviv referred The Times of Israel to the spokesperson for the US Navy’s European Command, Commander Kyle Raines, who said: “Our US Navy ships frequently visit Haifa, Israel, for both US-Israel bilateral military activity and port calls. There is no change to our routine operations with Israel. Our partnership with Israel is steadfast.”

Transportation Minister Israel Katz said in a statement: “The State of Israel handles all aspects related to the establishment and operation of infrastructures by foreign companies in Israel.”

Yigal Maor, the director-general at the Transportation Ministry’s Administration of Shipping and Ports, said that there was absolutely no reason to worry.

For one, Chinese companies are already present in ports all over the Western world, including in at least three ports in the US itself, he said. “In Seattle, they have a huge terminal.”

Yigal Maor (courtesy)

Furthermore, SIPG merely won the concession to operate the port’s container terminal, according to Maor.

“They won’t deal with general cargo, energy, or oil products. They will only deal with containers,” he stressed.

In a 2015 press release, SIPG said it will be “responsible for construction of the facilities at the back terminal, deployment and installation of the equipment and daily running and operation of the terminal.”

The company said the so-called Bayport terminal comprises “a total 1,500 meters of quay length,” but Maor asserted that the Chinese would not have have control of more than 10 percent of the entire port operation.

Maor, a retired merchant navy captain who has headed the Administration of Shipping and Ports since 2009, ridiculed concern of possible espionage at the port, saying that US vessels already dock not far away from Chinese boats. And anyway, “there are much better places” to gather valuable intel than the area where SIPG will be in charge, he maintained.

The company’s shareholders are Chinese, but at least 98 percent of the people who will actually work at the port will be Israeli citizens, he stressed. Israeli law doesn’t allow Chinese nationals to work in its ports, he added.

“I agree that we don’t fully understand China — they have a different mentality than we do. But we signed an agreement with them, and in case they violate it we can sanction them or terminate it altogether,” he said.

Fears about possible Chinese infiltration keeping American vessels from coming to Haifa are “nothing but old wives’ tales” that people are spreading, for whatever reason, to further exacerbate the already sensitive US-China relationship.

“Things like that don’t happen here, this is not ‘Mission Impossible,’” he said, referring to a series of spy movies.

Maor declined to respond to the charge that the Transportation Ministry did not consult with the National Security Council before signing the deal, merely offering, “Whoever in the government had to be involved — be it in the fields of security or finances — was involved since day one.”

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